Chapter 26 The economics of health, safety, and environmental regulation

Public concern and scientific research on health, safety, and environmental externalities (HSE) lured a number of economists to apply their tools and models to these issues. The materials balance model and the environmental models of are examples of incorporating HSE externalities into standard economic models. These enriched models have attracted a good deal of attention from both theorists and applied economists. The chapter reviews the economics of health, safety, and environmental regulation cites work of a large number of people trained in disciplines other than economics. The lesson appears to be that economists are narrowly bound by the models and view of what are interesting problems and approaches. When a movement as sweeping and important as the environmentalistconsumerist movement occurs, economists should not be complaining two decades later that government programs are not efficient. Tackling HSE issues is inherently difficult, because they involve some of the thorniest issues in economics: paternalism, public goods, information, and incentives for innovation, uncertainty, valuing nonmarket goods and services, and modeling unanticipated consequences of actions. Indeed the set of issues is so large and fascinating, it would provide employment for a great many theorists. The economics of HSE regulation has come from somewhat sterile arguments about Coase versus Pigou to a rich array of models, parameter estimates, and policy advice.